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Another Type of Financing Concession

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Price, condition and terms are factors that any owner must consider when marketing their home.Price is usually the easiest to adjust to compensate for shortcomings in location or condition of the home.Improving the condition of the property is more time consuming but updates to kitchens, baths and other things can appeal to a buyer.One of the most overlooked marketing factors are terms which are also referred to as financing concessions.Paying part or all a buyer's closing costs is the most common financing concession.By doing so, the buyer doesn't need as much cash to get into the home which can be attractive to more buyers. There is another financing concession that is not used very often in today's market but it is still allowed and can increase the marketability of a home. A temporary buy-down of the interest rate makes a lower payment for an initial period.It is still a fixed-rate mortgage that the buyer must qualify for at the note rate and there is no negative amort…

44 Times More Than a Renter

The Federal Reserve Board's Triennial Survey of Consumer Finances recently revealed the net worth of a homeowner was $231,400 compared to $5,200 for a renter.The net worth of homeowners increased 15% from 2013 to 2016 while renters' decreased by 5%.Appreciation and principal reduction are the two dynamics that affect a homeowner's equity.Each payment is applied to the interest for the previous month and the principal reduction to retire the mortgage.A $300,000 home purchased with a $294,566 FHA mortgage at 5% for 30 years has an average monthly principal reduction $362 in the first year. Two percent appreciation would benefit the buyer by $500 a month.In this example, the equity grows by $860 a month for the homeowner.A tenant would have to invest $660 a month over and above the rent they're paying.Based on the assumptions listed above, the $10,500 down payment would become approximately $85,000 of equity in seven years. Leverage and forced savings contribute to the di…

Gift of Equity

There is a little-known mortgage program that could provide the vehicle for the right person to get into a home.If a person sells their home to another for less than the fair market value, the difference in the appraised value and the sales price is considered a gift of equity for the buyer.FHA requires that borrowers receive gifts of equity only from family members transferring title to the borrower.An appraisal is required to determine the value of the home.The sales price is subtracted from the appraised value to determine the equity to be gifted.If a home appraises for $300,000 when the owner will sell it for $250,000, the gift is $50,000.The gift is applied to the down payment.In this example, the borrower would have to qualify for a $250,000 mortgage which would require private mortgage insurance because a 20% down payment on a $300,000 home would be $60,000.If the buyer had an additional $10,000 in cash to put down, the PMI would not be required, and the monthly payments would …

Do You Know the Way?

It may be natural for first-time buyers to be unsure of the process of buying a home because they haven't been through it before but even repeat buyers need to know changes that have taken place since the financial housing crisis.The steps in the home buying process are predictable and generally follow the same pattern.It certainly makes the move stay on schedule when you know all the different things that must be done to get to the closing.In the initial interview with your real estate professional, you share the things you want and need in a home, discuss available financing and learn how your agent can represent you in the transaction.The pre-approval step is essential for anyone using a mortgage to purchase a home to assure that they're looking at the right price of homes and so they'll know what they can qualify for and what the interest will be.Even with lower than normal inventory, it is difficult to stay up-to-date with the homes currently for sale and the new one …

Roll the Repairs into the Mortgage

It's been said that if you can find a home that has most of what you want, you should go ahead and purchase it.Many first-time buyers are using everything they have for a down payment and closing costs and would have to "live" with the less than perfect home until they can save the money to make the changes.The FHA 203(k) mortgage allows a borrower to purchase a home and provides additional funds for improvements to be made.These types of renovations can include kitchen and bathroom remodels, flooring, plumbing, heating and air conditioning systems, additions and other things.The benefit to the buyer is that they have the opportunity to consider a home that needs repairs and might have been unacceptable without a program like this.Being a FHA loan, a minimal down payment is required, fair interest rates and generous qualifying requirements.The 203(k) Streamline can be used for cosmetic improvements, appliances and minor remodeling up to $35,000 in cost.As you can imagine…

Getting the "Right" Home

Finding the right home is still the biggest challenge buyers are faced with in today's market as is shown in the latest Confidence Index Survey.Assuming the buyers find the "right" home with determination, perseverance and the help of a real estate professional, 88% of all transactions last year required financing to get the buyer's address on the home.93% of first-time buyers needed financing.Pre-approval is an essential step that needs to be handled before buyers begin searching for a home.The benefits to the buyer fall into the category of confidence.PRE-APPROVAL GIVES YOU CONFIDENCEKnowing the amount you can borrow
the mortgage amount decreases as interest rates riseLooking at the right priced homes
price, size, amenities, locationComparing and identifying the best loan
rate, term, typeUncover issues early that could affect the most favorable loan terms
time to cure possible problemsBargaining power to negotiate with the seller and possibly, competing buyers
price, te…

Start Early and Live Happily Ever-after

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As storybooks go, the character is introduced, they meet their love interest, a villain thwarts their intentions, true love overcomes, they marry and live happily ever-after.It's a very familiar formula.Similarly, there is a formula that couples follow in real life.They go to college, get a good job, rent a home, fall in love, get married and buy a starter home.They start a family, move into a larger home, save for their children's education, start planning for their retirement and if they live within their means, they invest their surplus funds.An alternative to this might be to start investing in rental homes early in their adult life before their standard of living becomes so expensive that they don't feel like they have the money to purchase rentals.There are infinite possibilities but let's say a single person, after getting a good job, buys a small three or four-bedroom home with an owner-occupied, minimum down payment.They move into the home and possibly, rent o…